Continued rate hikes are raising some concerns for the head of the Sarnia Lambton Business Development Corporation (SLBDC).
The Bank of Canada recently announced that it was hiking its key lending rate by 75 basis points to 3.25 per cent, up from 0.25 per cent at the start of 2022.
SLBDC General Manager Don Anderson said his concern is that the bank may overshoot the need for rate increases and really hobble the economy.
"Anybody that's carrying debt on their business, if your debt costs are floating, if you got $100,000 in debt, that just added $750 to your costs over the year, so that's something you're going to have to either absorb or pass on."
Anderson also said if the average consumer has debt, it will reduce the amount of disposal cash they'll have for the likes of purchases. He said it's important to be cautious moving forward.
"But at the same token, we also have to remember that rates are still in a low historic level and we're certainly not dealing with the double digit rates that we've experienced in the past," he said. "But still, the debt levels that people and businesses are carrying are concerning especially when you start to pass on these rates that in some cases have more than doubled the borrowing costs."
Anderson said in August, the country lost almost 40,000 jobs after expecting to add around 15,000 jobs.
"So, is it already impacting the economy? It may be more than we realize. That's not clear yet and that's a concern and we want to be cognizant of that going forward, that we don't put ourselves into a deeper recession than necessary."
Anderson said those who remember stagflation from the late 70s and early 80s certainly don't want to return to that. He also said the current data is conflicting.
"We still seem to have high inflation, we're having increasing unemployment, we also have the rates going up that's impacting business. Where's the consumer confidence going? So, it's a little bit of a mixed situation at this point."
The central bank expects the economy to moderate in the second half of 2022, bringing demand more in line with supply.
